Embed Size (px)
Citation preview
bluepaperDecember 2017
05
Consumer Relations in the Digital Economy
#1 2018: inovation takes the lead Carlos Portugal Gouvêa
#2 Data profusion, privacy and consumer protection Lílian Cintra de Melo e Gustavo Ferreira de Campos
#3 Equity crowdfunding: a pioneer alternative that requires attention
Lílian Cintra de Melo e Rodrigo Fialho Borges
#4 Tax challenges of the digital economy Ana Carolina Monguilod e Marcelo Moura
#5 Digital advertising: targeted consumer experience for the user Eduardo Fucci e Mariana Mello
#6 Virtual currencies Caio Yoshikawa
#7 Artificial intelligence and dispute resolution Bruna Garner e João Paulo Guerra
32
PG
Law
Blu
ePa
per, D
ece
mber
20
17
Menu
Following the path that corporate governance in Brazil has taken, PGLaw believes that while
the previous year was focused on a reconstruction process, centered on integrity programs,
2018 will be marked by the beginning of an intense renewal in our business practices. It will
be a year of substantial development of the technology and practices of the new collabora-
tive economy in our society. At a time when we see the rampant development of the app
economy and artificial intelligence technologies, the law could not go untouched by all these
transformations.
The recent US elections defined the end of a dazzle with innovation, highlighting new tech-
nologies as tools already incorporated in the market and with enormous decisive power. The
development of new forms of investment, the incorporation of artificial intelligence by the
judiciary, the sophistication of payment technologies, the subtle relationship between data
storage and protection, and their use in advertising will be essential themes for adapting to a
more dynamic and challenging market. It is indispensable to introduce the disruptive technol-
ogy at least into the vocabulary, if not into the day-to-day, of companies that have corporate
governance as an instrument for development.
“BluePaper” is a series of PGLaw publications on innovative legal issues that are essential
to contemporary business practice. In this special edition for the year 2018, we offer our
customers and partners a guide for the disruptive issues that are causing profound change in
the market and legal environments. To that end, each of our specialists presents its area, ad-
dressing equity crowdfunding, artificial intelligence and conflict resolution, virtual currencies,
privacy and data protection, tax, and digital advertising. ■
Carlos Portugal Gouvêa
This past year confirmed our prognostics regarding the growing importance of implementing compliance mechanisms in corporate practices, both in Brazil and in the world. The unfoldings of Operação Lava
Jato, involving investigations of grand names of the Brazilian business community followed
by convictions for crimes related to systematic corruption, made evident that such actions
were not connected to just one corporation or to a single sector of the economy. Thereby, it
is imperative to recognize that no organization is immune to the deleterious effects of such
practices, which led us to believe that in 2017, more than ever in Brazilian history, the prior-
ity of the Brazilian corporations’ governance is the development of new risk control tools for
business integrity.
Confirming this frame, the govern-
ment fiscal program of exterior as-
sets regularization (Programa Federal
de Repatriação), launched in the end
of 2016, have had great adhesion.
Such success led to an extension
of the program in the first half of
2017, when close to R$ 4,6 billion in
assets of Brazilian residents abroad
have been regularized. The pro-
gram was extremely relevant since
it allowed a vast number of Brazilian corporations to strengthen their compliance framework
related to anti-money laundering policies, setting our market at a higher level regarding the
security of financial and commercial operations.
#1
2018: inovation takes the lead
It is indispensable to introduce the disruptive technology
at least into the vocabulary, if not into the day-to-day, of
companies that have corporate governance as an instrument
for development
PGLaw believes that while the
previous year was focused on a
reconstruction process, centered
on integrity programs, 2018 will be
marked by the beginning of
an intense renewal in our
business practices.
54
PG
Law
Blu
ePa
per, D
ece
mber
20
17
Menu
No. 8.771 of 2016, which regulates MCI, define the rights to inviolability of intimacy and pri-
vacy, assuring the right to receive compensation for material or moral damages resulting
from its violation. According to MCI, users have the right to inviolability and the secrecy of
online communications and stored private communications; and the non-provision of perso-
nal data to third parties, including records of connection and access to Internet applications,
except through free, express, and informed consent. Currently, there are three bills for the
protection of personal data in progress in the Brazilian National Congress (Bill No. 4.060 of
2012, Senate Bill No. 330 of 2013, and Bill No. 5.276 of 2016). Main controversial points in-
clude the definition of the concept of personal data and consent, liability for data processing,
cooperation for international data transfer, monitoring mechanisms, and the creation of an
independent regulatory authority.
The General Data Protection Regulation (EU 2016/679) (“GDPR”) replaces the European Data
Protection Directive of 1995 (95/46/EC) and applies to all entities collecting and using data of
European Union residents, as of 25 May 2018. In a nutshell, GDPR innovates by introducing
the stronger proof of user consent and notice, mandatory breach notification, as well as the
rights to erasure (also known as the “right to be forgotten”), portability, rectification, limita-
tion or even the right to object to the processing of personal data. In addition, GDPR advoca-
tes for transparency and recommends data protection impact assessments (“DPIA”). Finally,
the EU new regulation is an effort to harmonize practices and standardize the use of cros-
s-border data. Therefore, it is expected GDPR will have a considerable international reach.
In this regard, the General Assembly of the United Nations (“UN”), through Resolution No.
70/186 of 2015, reviewed the UN Guidelines for Consumer Protection - the most important in-
ternational document dealing with consumer protection. For the first time, it was recognized
the importance of promoting best practices, such as (i) compliance programs, and (ii) protec-
tion of consumer privacy, through control, transparency, security, and consent mechanisms
related to the collection and use of personal data.3
Notwithstanding the risks are not limited exclusively to privacy issues but include intellectual
property rights of consumers and competition law. The first is related to licensing issues for
data use and liability for third-party content that infringes copyright. Competition law, on the
other hand, has also given rise to increasingly frequent concerns as huge databases increase
the companies’ market share and may create competition problems, ranging from monopo-
lies formation to anticompetitive practices, such as the cartel or the exclusion of competitors.
In addition, there is the possibility of developing consumer compliance programs and imple-
menting technical solutions such as privacy by design and privacy by default, which prevent
leaks, theft, misuse, piracy and other damages - including reputational and consumer mis-
trust in products and services.
3 http://unctad.org/en/PublicationsLibrary/ditccplpmisc2016d1_en.pdf
Lílian Cintra de Melo e Gustavo Ferreira de Campos
In 2011, the World Economic Forum was a pioneer to declaring that “personal data is the new ‘oil’ of the Internet and the new currency of the digital world.”1 Today, it is common sense that information
is not only an output but also an input for the creation of new goods. It is the primary asset
present in many of current information and communication technologies (“ICT”), such as arti-
ficial intelligence (ruled by big data and complex mathematical algorithms), cloud computing,
virtual reality, internet of things (“IoT” ) and smart cities.
Governmental records, health data, consumer profiles, financial information, metadata, and
private communications (such as emails or instant messages) can be collected, processed,
copied, or monetized millions of times in a matter of milliseconds. It is estimated that per
day Internet users produce 2.5 quintile bytes of data, which means a figure accompanied by
18 (eighteen) zeros.2 Many of these data can be used to improve products and services or to
offer targeted-consumer digital advertising. However, as companies become more and more
dependent on such practices, they also must recognize, avoid, and reduce risks associated
with them.
In Brazil, although there is no specific law, it can be considered the protection of personal
data arises from sparse provisions. The Brazilian Consumer Protection Code (“CDC”) and De-
cree No. 2.181 of 1997, which regulates the National System of Consumer Protection and
establishes administrative sanctions foreseen in the CDC, deal together with the protection
of personal data and privacy of consumers. Also, Decree No. 7.962 of 2013 provides for the
consumer’s protection in electronic commerce.
In addition, Law No. 12.965 of 2014, the so-called Marco Civil da Internet (“MCI”), and Decree
1 http://www3.weforum.org/docs/WEF_ITTC_PersonalDataNewAsset_Report_2011.pdf
2 https://cloudtweaks.com/2015/03/surprising-facts-and-stats-about-the-big-data-industry/
#2
data profusion, privacy and consumer protection
6
PG
Law
Blu
ePa
per, D
ece
mber
20
17
7
If nowadays we live in a climate of optimism, with the exponential increase of computational
capacity and the expansion of legal security, in 2018, data will progressively be protagonists
of all businesses, which aim to innovate and grow in a digitally interconnected world. In this
scenario, companies shall implement mechanisms for identifying, preventing, and mitigating
risks associated with new technologies, including compliance programs and data protection
impact assessments. ■
Menu
Lílian Cintra de Melo e Rodrigo Fialho Borges
Today, four of the five most valued brands of the planet are part of the branch of technology.1 A few decades ago such trademarks were no
more than seemingly disruptive ideas, as were several others in constant formation. Howe-
ver, these ideas often need significant upfront investments to get them off the paper. Also,
due to the technological evolution, an alternative to obtaining the required initial amount is
crowdfunding.
Worldwide, by the middle of 2017,
it was estimated that USD 7.2
billion was raised through
crowdfunding platforms. In
Brazil, this figure is close to
USD 8 million. By 2021, the es-
timate is that the amount rea-
ches USD 19 billion.2 This total
amount can be divided mostly
into four categories of crowd-
funding: donations, rewards, loans, and investments (or equity). Equity crowdfunding occurs
when users of the platforms invest in companies in exchange for corporate shares, in the
expectation that the return of the investment will be through dividends and the valuation of
the shareholding received if the company has succeeded.
In Brazil, the equity crowdfunding category has already been developed since 2013, with the
emergence of some platforms that enabled their activities, based on Art. 5, III, Paragraph
4, of CVM Instruction No. 400. This regulation exempted from registration public security
1 https://www.forbes.com/powerful-brands/list/#tab:rank
2 https://www.statista.com/outlook/335/100/crowdfunding/worldwide#market-arpu
#3
equity crowdfunding: a pioneer alternative that requires attention
Worldwide, by the middle of
2017, it was estimated that USD
7.2 billion was raised through
crowdfunding platforms. In
Brazil, this figure is close to USD 8
million.
8
PG
Law
Blu
ePa
per, D
ece
mber
20
17
9
offers issued by micro and small enterprises, provided they were limited to R$ 2.4 million per
year. Parallel to the creation of the first platforms, discussions began on the development of
specific regulations for crowdfunding, which culminated in the CVM Instruction No. 588 of
July 2017.
Based on CVM Instruction No. 588, companies with annual gross revenues of up to R$ 10
million are eligible to issue public securities offers, with a maximum funding of R$ 5 million
and a maximum duration of 180 (one hundred and eighty) days. On the investor side, the
limit of R$ 10 thousand in investments per year was foreseen, except if it is a leading investor,
defined in terms of the regulation itself; qualified, by Art. 9-B of CVM Instruction No. 539; or
who have annual gross income or financial investments in an amount more than R$ 100 thou-
sand. Regarding platforms, among other requirements, to obtain registration before CVM,
they should prove a minimum paid-up capital of R$ 100 thousand, appropriate information
and communication technology procedures and systems that can be verified, as well as a
code of conduct applicable to its partners, administrators and employees.
Additionally, crowdfunding actors should have other cautions that are not explicitly expres-
sed in CVM Instruction No. 588. First, offerors should be cautious about their intellectual pro-
perty rights, since, usually, the primary asset of their projects is an intangible good. Whereas
crowdfunding platforms can give free publicity to the project, descriptions of these ideas in-
serted therein can be accessed by any Internet user. Therefore, in addition to the possibility
of filling the project with the National Institute of Industrial Property (“INPI”), there are also in-
direct protections through contractual controls of confidentiality and exclusivity. These con-
tractual assurances guarantee the protection of the primary asset of crowdfunding projects,
preventing risks of a posteriori litigation and collision of rights between project collaborators.
Second, since crowdfunding platforms allow resources to be raised from individuals who are
not used to the investment market, they can be treated as consumers, in such a way that
consumer protection legislation applies to such a relationship. CVM Instruction No. 588 itself
reinforces this understanding by bringing various items aimed at protecting investors. A clear
example is its Art. 3, III, which guarantees a period of withdrawal of at least 7 (seven) days,
If crowdfunding was already experiencing a high growth
trend in Brazil, with the new regulation that creates greater
security for the three main actors involved, the expectation
is that investment in innovative ideas will be increasingly
democratized through platforms.
without incidence of fines or penalties, similar to the right outlined in Art. 49 of the Brazilian
Consumer Protection Code and reinforced by Art. 5 of Decree No. 7.962/2013, applicable to
the electronic commerce. In this sense, platforms shall adopt internal mechanisms for com-
pliance and prevention of consumer conflicts.
If crowdfunding was already experiencing a high growth trend in Brazil, with the new regula-
tion that creates greater security for the three main actors involved, the expectation is that
investment in innovative ideas will be increasingly democratized through platforms. Esta-
blishing compliance programs will be the best approach to identify, prevent and mitigate
regulatory risks. ■
1110
PG
Law
Blu
ePa
per, D
ece
mber
20
17
Menu
variation of its understanding based on the fact that this software was stored in the cloud,
what would justify its taxation as a “technical service.”7
The reality is that this dichotomy and the curious interpretations given by Brazilian federal
tax authorities to define what would be an “off the shelf” software, a SaaS or even a license
of use (temporary or unlimited), leads to uncertainty in the interpretation and taxation of
countless digital businesses.
In the realm of State, taxation the scenario is no different: the publication of ICMS8 Agreement
No. 106/2017 points out that State tax authorities insist on interpreting typical situations
from the digital economy based on the notion of goods.
Considering that municipal tax authorities may, in a few of the abovementioned situations,
understand that the business model is mainly driven by the rendering of services, potentially
taxed based on Federal Complimentary
Law,9 the additional risk of conflict of ta-
xing rights cannot be disregarded.
In this sense, the current legislative
approach does not keep up with the mo-
dern technologies, leading to distorted
interpretations based on archaic con-
cepts and unrelated to the businesses’
reality. The digital economy usually in-
volves multiple tasks potentially classified into more than a single concept. These overlap of
potential tax claims may often lead to double taxation.
A possible solution would be for tax authorities to better understand the structure and pur-
pose of products related to the digital economy and to make an effort to determine the
taxable events in a more rationale manner.
Even more desirable would be to take advantage of an eventual tax reform to eliminate these
distortions and to adopt a more comprehensive and universal tax basis. Nothing is better
than legal certainty for businesses and investments.
Disregarding the innovative technologies and their influence on the taxpayers’ businesses makes
room to a mismatch between the interpretation of the tax rule and the reality, generating conflicts
of taxing rights and double taxation events (more rarely, non-taxation). These problems tend to
worsen as new disruptive technologies are developed. Hence, there is a great need to update the
Brazilian tax policy applied to the growing digital economy. Until then, taxpayers will have to deal
with this uncertainty, carefully studying and planning the structuring of their businesses. ■
7 Subject to withholding tax (IRRF) and to contribution of intervention in the economy (CIDE) at 15% and 10% rates, respectively.
8 Tax on distribution of goods and services (equivalent to a value-added sales tax).
9 Items 1.03 e 1.04 of the list of services attached to Federal Complimentary Law No. 116/2003.
Ana Carolina Monguilod and Marcelo Moura
Many countries around the world are facing challenges related to the taxation of the digital
economy. To address this issue, the Organization for Economic Cooperation and Develop-
ment (“OECD”) published in 2015 the final report on Action 1 of the BEPS project (Base Erosion
and Profit Shifting).1, 2 The report stated that, although the digital economy and its business
models do not raise unique tax issues, they certainly exacerbate existing tax problems.3
The same applies to Brazil. The emergence of new business models, driven mainly by the
rising technological development, brings deep challenges to the rationale of the Brazilian
taxation, which is still based on standards and concepts from the 20th century. Consequently,
difficulties will arise on the identification of taxable events as well as on the allocation of tax
revenues amongst the Federal, State and Municipal administrations.
In relation to the taxation of software, for example, the Brazilian Federal Revenue (“RFB”4) still
takes into account the old dichotomy between services and goods in order to interpret the
legal nature of the so-called “by order” and “off the shelf software.”5 While the software “by
order” - which is developed to specifically fulfill the necessities of a certain user - would cor-
respond to a service, the “off the shelf” software (referred to as “off the shelf” due to the fact
that they are sold in an uniform manner and offered to any consumers interested on buying
multiples copies)6 would be regarded as goods, without to any regard to the underlying licen-
se, whether limited or unlimited.
Nevertheless, when the Federal Revenue Service recently interpreted the software as a servi-
ce (SaaS) under its Answer to Advance Tax Ruling No. 191/2017, there has been an apparent
1 OECD’s Project to address the base erosion and the artificial shift of profits to low or nil-tax jurisdictions.
2 OECD, Addressing the Tax Challenges of the Digital Economy, Action 1- 2015 – Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing: Paris, 2015.
3 P. 11.
4 Receita Federal do Brasil.
5 Answer to Advance Tax Ruling Requests No. 3/2008, 230/2017, 243/2017, 303/2017, 407/2017, 434/2017.
6 In the past, this type of software was embedded in a physical CD and used to be purchased “out of shelves” in physical stores. For this reason, the name “off the shelf” is still used today to characterize it.
#4
tax challenges of the digital economy
The actual legislative approach
does not keep up with modern
technologies, leading to
distorted interpretations based
on archaic concepts without
relation to businesses’ reality.
1312
PG
Law
Blu
ePa
per, D
ece
mber
20
17
Menu
Advertising in applications, through banners and videos, is an industry sector already con-
solidated and regulated in some developed economies, and displays inconsistencies already
diagnosed, although not yet solved. The biggest of those problems, due to its major outco-
mes, is fraud in monetization metrics - for example, with the production of artificial clicks in
case of cost-per-click advertisers (“CPC”).
On the other hand, on the Influencers’
department, the informality in their envi-
ronment - social networks - and the opa-
city of the relationship between adverti-
sers and influencers, as well as between
influencers and their “followers”, can
result in contingencies in different legal
spheres: such as tax, labor and consu-
mer laws, for example. What is the relationship established between advertiser and influen-
cer; how to define and tax the remuneration received by them; and what are the liabilities
assumed by advertisers and influencers before followers and potential consumers. These are
some of the legal questions raised in this new field of digital advertising.
The relationship between advertisers, developers, and consumers, especially with regards to
advertising in mobile sites and apps on its “classic” format, depends on advertising compa-
nies that act as intermediaries. In addition to the aforementioned fraud problem, specifically
in Brazil, those companies find a hostile environment for their development, which is mate-
rialized in gaps and uncertainties brought by the Brazilian tax system, in addition to excessive
competition with large technology multinationals and difficulties in the scope of representa-
tion before law enforcement agencies and self-regulators.
The relationship established between advertisers and developers is not necessarily limited to
the national territory. Therefore, in situations that Brazilian advertisers advertise in foreign
clients’ apps and websites, the established link is classified by our tax legislation as importa-
tion of services, which has a general tax rate bigger than 40% (forty percent) of the imported
service price - or, in other words, the leased advertising space.
Thus, digital advertising companies risk being taxed as if the total value they initially received
by advertisers were their own revenue. Those legal obstacles represent a disincentive to
advertising intermediation’s activity and require legal planning, including tax and corporate
planning, attentive to international market trends, so it becomes possible to work with do-
mestic and foreign clients at a competitive margin and that does not present legal, financial,
regulatory and/or image and reputation risks. ■
Eduardo Fucci e Mariana Mello
As noticed in many other businesses, advertising has been af-fected by technological transformations, which are reflected not only in
how advertising is produced and consumed, but also on its content. Smartphones powered
by mobile Internet and filled with applications that quickly and conveniently operationalize
the various kinds of relations people develop daily, as well as Internet sites accessed through
laptops and tablets, are efficient adver-
tising tools. In addition to providing a
constant bond between advertisers and
consumers, since a great portion of the
information consumed is through the
Internet, that gadgets’ myriad, as well as
the potential collection and data analy-
sis targeting the creation of consumer
patterns (targetings), also allows adver-
tising to be segmented and customized.
Digital advertising proves to be extre-
mely advantageous - both for adverti-
sers and for consumers - for a variety of
reasons: high visibility due to wide cove-
rage, time-saving, quick and easily measured results, low costs, targeted advertising, aside
from the various formats by which it materializes. Advertisements can be delivered through
banners, videos and live formats on search engines, social networks, blogs and varied sites,
as well as by e-mail and, more recently, interactive ads made by influencers, which can be
interesting from a financial perspective due to the high degree of “engagement” of its users
and content followers, however, brought new legal challenges.
#5digital advertising: targeted consumer experience for the user
Legal obstacles represent a
disincentive to advertising
intermediation’s activity and
require legal planning, including
tax and corporate planning.
Digital advertising proves to be
extremely advantageous for a
variety of reasons: high visibility
due to wide coverage, time-saving,
quick and easily measured results,
low costs, targeted advertising,
aside from the various formats by
which it materializes.
1514
PG
Law
Blu
ePa
per, D
ece
mber
20
17
Menu
already accept Bitcoins as payment for their products. Therefore, there is a global trend in the
consumer market to make use of virtual currencies, as the experience in other jurisdictions
become more and more consolidated. Commercial, accounting, and legal impacts in Brazil
will eventually follow.
The multiplication of virtual currencies already created a new phenomenon named: “Initial
Coin Offering” (“ICO”), which already raised more than US$ 2 billion in the first nine months of
2017. On October 11, 2017, the Brazilian Securities and Exchange Commission (“CVM”) issued
a Notice on ICOs, opportunity in which it was defined by this document as “public fundraising
in exchange for virtual assets, also known as ‘tokens’ or ‘coins’, with the investor public.”
Such transactions may be characterized as public offerings of securities and shall be subject
to Art. 2 of Law No. 6.385/1976 (the “Capital Markets Law”) depending on the economic back-
ground and rights conferred to the purchasers. In this case, the person responsible for the
ICO’s transaction shall comply with all requirements and formalities required by law and CVM
regulations for the securities’ public offerings. If the ICO is characterized as a securities public
offering, then the acquisition of securities shall be regarded as illegal, since no exchanges of
virtual currencies are currently authorized by CVM to make available environments of the
securities exchange.
The global trend towards regulation, an ever-increasing participation of major financial insti-
tutions in the virtual currency market, and the ICOs, may indicate a more intense and broad
use of the virtual currency. As a result, it is possible that regulatory bodies and the Courts
stand watchful on the liability of the companies which perform activities of virtual currency
exchanges, including in the realm of the consumer law. ■
Caio Yoshikawa
The virtual currencies (or cryptocurrencies) liquidity has been more and more attractive to business. Not by chance, the increase in number
of negotiations involving Bitcoin and other cryptocurrencies has attracted the attention of
regulatory and supervisory entities of the financial and the capital markets.
In 2014, the Central Bank of Brazil (“Bacen”) issued the Notice (Comunicado) No. 25,306, of
February 19, which addresses certain characteristics and risks involved with the use of virtual
currency. The following aspects may be highlighted: (i) virtual currency is neither issued nor
guaranteed by a monetary authority; (ii) certain virtual currencies are issued and traded by
non-financial institutions, while others don’t even have a qualified entity; (iii) there is no assu-
rance of conversion into an official cur-
rency – the valuation is entirelly based
on trust and credibility given by users;
(iv) the price fluctuations of virtual cur-
rency may be extremely high and abrupt,
and it can even lead to the total loss of
its value; (v) any imposition of prudential,
mandatory and punitive measures by governmental authorities may have a direct impact in
the value of a virtual currency; (vi) users of virtual currency may be involved in criminal inves-
tigations due to a high risk of money laundering; and (vii) risk of losses arising from actions
of cyber-criminals.
Notice No. 25,306 of 2014 sets an alert on the absence of virtual currency regulation. In 2017,
however, Japan started to regulate virtual currency as a mean of payment. The largest pla-
tform for negotiation of Bitcoins in Japan, bitFlyer, has the three largest banks in the country
as its shareholders. In addition, important retail companies of Japan, such as Bic Camera,
#6
virtual currencies
The virtual currencies (or
cryptocurrencies) liquidity has
been more and more attractive
to business.
The global trend towards regulation, an ever-increasing
participation of major financial institutions in the virtual
currency market, and the ICOs, may indicate a more intense and
broad use of the virtual currency.
1716
PG
Law
Blu
ePa
per, D
ece
mber
20
17
Menu
Although in an incipient way, Brazilian judicature uses artificial intelligence to solve conflicts
in simpler and ordinary lawsuits, which do not have multiple doctrinal or jurisprudential di-
vergences and demand a standard sentence. This system is known as the “Expert System.”
The qualification of the parties and the relevant information are automatically allocated ba-
sed on the data registered in the distribution phase of the process. The decision, in turn, will
only be issued after a questionnaire is answered by the judges, allowing the sentence to be
elaborated, based on the legal provisions. Then a review of the sentence can be made by the
judge and corrections, or amendments can be presented, if necessary.
The Expert System gathers several
functionalities that are present in the
reality of the Brazilian public autar-
chies. The Office of the General Coun-
sel for the Federal Government (“AGU”),
for example, has created the Sapiens
program as a way of automatically
filling out information in repeating pro-
cesses and analyzing appeals possibili-
ties. In the Federal Public Prosecutor’s
Office (“MPF”), the system developed is
Aptus, which stores and manages data.
The robot Dr. Luzia of the Federal Dis-
trict Attorney’s Office was created to as-
sist in tax foreclosures. And so, several
judicial bodies have adopted artificial
intelligence to optimize and expedite the judicial process, but it is important to mention that
even the National Council of Justice (“CNJ”) already plans to implement these mechanisms at
national level.
The investment in big data and analytics are increasing in all sectors of the economy, and
the Judiciary was not far behind. In a scenario in which nearly 90% of the expenditures with
the Judiciary are allocated for staff payment in one of the most expensive Judiciaries in the
world, although current initiatives do not reduce the number of judges, artificial intelligence
optimizes the achievement of mechanical tasks, such as certificating a deadline or schedu-
ling audiences. Also sum gains for legal security and isonomy in solving repeated demands,
surpassing even the recent innovation brought by the Law No. 13.105 of 2015 (the “Brazilian
Code of Civil Procedure”), known as Incident of Resolution of Repetitive Demands (“IRDR”).
On the other hand, advances also exist in the so-called ADR methods. The platform Consu-
midor.gov.br, monitored by the National Secretariat for Consumer (“SENACON”), Procons,
Public Prosecutors, and Public Lawyers, allows direct interaction between consumers and
Bruna Garner e João Paulo Guerra
The automation of alternative dispute resolution (“ADR”) in the judiciary is a reality and tends to intensify even more in the com-ing years. Although advances are timid when compared to the private sector, today
there are many innovative initiatives aimed at implementing artificial intelligence to conflict
resolution.
In a nutshell, artificial intelligence refers to procedures performed by machines that encom-
pass robotization, dematerialization, autonomous driving, and, among other aspects, the
constant deep learning. In ADRs and the judiciary, artificial intelligence appears in the form
of channels, which use algorithms to reach a decision analyzing the available data. These
data can be collected progressively or processed from a previously supplied database to the
system, but it is essential for the quality of the results that they are organized and suitable.
With the adoption of electronic processes by the Brazilian courts, it was possible to store an
enormous amount of data on litigation in progress that made it possible to catalog systema-
tically all the information related to them, from their objects to the decisions, forming the
so-called “Judicial big data.” In this way, it is possible to discover, based on the identification
of logic patterns and through complex algorithms, what is the next procedure of the process
or even the probability of demand being judged appropriate.
#7
artificial intelligence and dispute resolution
The increasingly converging
relationship between artificial
intelligence and dispute resolution
is beneficial in different ways,
most notably because it
guarantees rights, expands access
to justice, speeds the procedural
process, reduces costs, and
decreases bureaucratization.
The investment in big data and analytics are increasing in all
sectors of the economy, and the Judiciary was not far behind.
18
PG
Law
Blu
ePa
per, D
ece
mber
20
17
19
companies to solve consumer conflicts over the Internet. Currently, 80% of the complaints
registered in the platform were solved by the companies. Furthermore, the Administrative
System of Internet Conflicts concerning domain names under the “.br” (“SACI-Adm”), moni-
tored by Registro.br, aims at solving disputes between the domain name holder and third
parties. In 2017, SACI-Adm completed 7 (seven) years and registered 440 conflicts resolved.
Finally, it is essential to highlight the role of e-commerce platforms allowing consumers to
start complaints and settle them at zero cost and virtual currency platforms using blockchain
to execute the so-called smart contracts.
The increasingly converging relationship between artificial intelligence and dispute resolution
is beneficial in different ways, most notably because it guarantees rights, expands access to
justice, speeds the procedural process, reduces costs, and decreases bureaucratization. ■
Av. Nove de Julho, 3.452, Conj. 132
São Paulo, SP 01406-000, Brasil
T +55 11 3085 0089
2225 East Bayshore Road, Suite 200
Palo Alto, CA, 94303, United States
T +1 650 513 0979
